FSA Level 1 Exam Study Guide
FSA Level 1 Exam Study Guide Questions
and Answers
Question 1
How do disclosures based on SASB Standards help meet the needs of different types
of investors?
Correct Answer
Tracking certain CPIs, ESG screens etc. the use of ESG data on financially material
topics is used to enhance pre and post investment decision making
Question 2
Some of the earliest efforts to promote the disclosure of non-financial information
can be seen in the IFRS Management Commentary and US SEC's Management
Discussion & Analysis (MD&A). What two similarities exist between these two
reporting instruments? (Choose two)
Correct Answer
They provide context and analysis to interpret a company's future performance;
They are a natural location to disclose material sustainability information
Question 3
Why do companies pursue sustainability disclosure?
Correct Answer
Aligning on "why" gives internal stakeholders better understanding of audience
needs. Can also be motivated by peer effects, investor requests etc.
Question 4
Why is SASB's objective of cost-effectiveness for reporting companies ultimately in
the best interest of providers of capital?
Correct Answer
If companies spend more than the value disclosure generates, there is potential for
sustainability disclosure as a business function to negatively impact enterprise value.
Page 1 of 18
, FSA Level 1 Exam Study Guide
Question 5
Besides companies and their investors, what other institutions influence demand for
sustainability information?
Correct Answer
The performance benefits that investors and companies experience when
integrating sustainability information into their decision-making process are not the
only factors driving demand for it. Other organizations, both public and private
influence global ESG dialogue
Question 6
When preparing for sustainability disclosure, what two steps do companies generally
take at the beginning of the fiscal year (choose two)?
Correct Answer
Define performance goals and KPIs; Align with key players on reporting processes
and goals
Question 7
A national securities commission announced that starting next year, all listed
companies will be required to disclose ESG performance. The announcement was
accompanied by new sustainability disclosure guidance. The guidance provides a
reporting template that specifies which disclsorue topics companies must report,
including specific metrics and units of measurement related to economic,
environmental and social performance. During the first three years of the disclosure
mandate, companies may choose to omit certain metrics if they provide sound
rationale explaining why the information is not yet available. What tow characteristics
of regulatory disclosure guidance does this reflect?
Correct Answer
Line-item & Comply-or-explain
Question 8
How do metrics/KPIs contribute to a successful sustainable business strategy?
Correct Answer
Relevant KPIs can be the difference between effectively managing sustainability
performance or experience performance declines. ESG metrics tied to financial
materiality can directly inform business strategy.
Page 2 of 18
, FSA Level 1 Exam Study Guide
Question 9
What two documents define SASB's governance procedures, and what purpose do
they each serve?
Correct Answer
Conceptual Framework - defines the principles and characteristics of standard-
setting process, framework to resolve questions
Rules of Procedure - establishes the processes and practices followed by SASB in its
standard setting and governance and oversight of related processes and practices
Question 10
Which type of investor tends to contribute most to the ESG performance of the firms
in which they invest?
Correct Answer
Private equity investors
Question 11
What are two challenges investors face when integrating sustainability disclosures
into financial analysis?
Correct Answer
Many companies disclose binary sustainability data rather than performance data;
Material sustainability information that is currently disclosed is often not
comparable within an industry.
Question 12
How do the SASB Standards evolve over time?
Correct Answer
SASB implements a project based model for standards development. Proposal ->
Standard setting project -> Board approval
Question 13
What objective prevails today as the focus of financial accounting?
Correct Answer
Decision-usefulness of reported information
Page 3 of 18
FSA Level 1 Exam Study Guide Questions
and Answers
Question 1
How do disclosures based on SASB Standards help meet the needs of different types
of investors?
Correct Answer
Tracking certain CPIs, ESG screens etc. the use of ESG data on financially material
topics is used to enhance pre and post investment decision making
Question 2
Some of the earliest efforts to promote the disclosure of non-financial information
can be seen in the IFRS Management Commentary and US SEC's Management
Discussion & Analysis (MD&A). What two similarities exist between these two
reporting instruments? (Choose two)
Correct Answer
They provide context and analysis to interpret a company's future performance;
They are a natural location to disclose material sustainability information
Question 3
Why do companies pursue sustainability disclosure?
Correct Answer
Aligning on "why" gives internal stakeholders better understanding of audience
needs. Can also be motivated by peer effects, investor requests etc.
Question 4
Why is SASB's objective of cost-effectiveness for reporting companies ultimately in
the best interest of providers of capital?
Correct Answer
If companies spend more than the value disclosure generates, there is potential for
sustainability disclosure as a business function to negatively impact enterprise value.
Page 1 of 18
, FSA Level 1 Exam Study Guide
Question 5
Besides companies and their investors, what other institutions influence demand for
sustainability information?
Correct Answer
The performance benefits that investors and companies experience when
integrating sustainability information into their decision-making process are not the
only factors driving demand for it. Other organizations, both public and private
influence global ESG dialogue
Question 6
When preparing for sustainability disclosure, what two steps do companies generally
take at the beginning of the fiscal year (choose two)?
Correct Answer
Define performance goals and KPIs; Align with key players on reporting processes
and goals
Question 7
A national securities commission announced that starting next year, all listed
companies will be required to disclose ESG performance. The announcement was
accompanied by new sustainability disclosure guidance. The guidance provides a
reporting template that specifies which disclsorue topics companies must report,
including specific metrics and units of measurement related to economic,
environmental and social performance. During the first three years of the disclosure
mandate, companies may choose to omit certain metrics if they provide sound
rationale explaining why the information is not yet available. What tow characteristics
of regulatory disclosure guidance does this reflect?
Correct Answer
Line-item & Comply-or-explain
Question 8
How do metrics/KPIs contribute to a successful sustainable business strategy?
Correct Answer
Relevant KPIs can be the difference between effectively managing sustainability
performance or experience performance declines. ESG metrics tied to financial
materiality can directly inform business strategy.
Page 2 of 18
, FSA Level 1 Exam Study Guide
Question 9
What two documents define SASB's governance procedures, and what purpose do
they each serve?
Correct Answer
Conceptual Framework - defines the principles and characteristics of standard-
setting process, framework to resolve questions
Rules of Procedure - establishes the processes and practices followed by SASB in its
standard setting and governance and oversight of related processes and practices
Question 10
Which type of investor tends to contribute most to the ESG performance of the firms
in which they invest?
Correct Answer
Private equity investors
Question 11
What are two challenges investors face when integrating sustainability disclosures
into financial analysis?
Correct Answer
Many companies disclose binary sustainability data rather than performance data;
Material sustainability information that is currently disclosed is often not
comparable within an industry.
Question 12
How do the SASB Standards evolve over time?
Correct Answer
SASB implements a project based model for standards development. Proposal ->
Standard setting project -> Board approval
Question 13
What objective prevails today as the focus of financial accounting?
Correct Answer
Decision-usefulness of reported information
Page 3 of 18
